After receiving public comment Tuesday, Gunnison City Council gave the green light to electric rate increases which average 7.1 percent across the board.
The increases for the municipal power supplier are intended to help build cash reserves to cover required maintenance for rebuilding and replacing aging infrastructure. The rate changes will take effect May 10.
The cost of power the city receives from both the Municipal Energy Agency of Nebraska and the Western Area Power Administration increases annually. In 2017, a cost of service study was conducted on behalf of the city which outlined capital improvement projects as well as recommended rate increases to cover the costs for purchased power, yearly operational costs and additional money for reserves. New rates will also allow for saving for a substation power transformer scheduled for purchase in 2021.
“Aging infrastructure is one thing, but not having enough infrastructure is another thing,” said Public Works Director David Gardner.
During a public hearing on the proposed rate increases, Chris Nutgrass asked how the city was planning for “resiliency” — or greater reliance on renewable energy sources — in addition to addressing current infrastructure.
“What would be the schedule for the next rate hike to think about future resiliency in the system?” asked Nutgrass.
Tom Gregory questioned why the electric rates in Gunnison are so low compared to other municipalities in the state.
Mayor Jim Gelwicks explained that the city struck energy deals decades ago when the Blue Mesa Reservoir dam was being constructed.
At the end of 2016, the city’s electric division reserves were as low as $600,000. Gunnison anticipates having $1.3 million in reserves at the end of 2018. In terms of reserves, Gardner proposed reaching $2.2 million by the end of 2022 as a part of a five-year plan. However, the cost of the substation power transformer for the Gunnison main substation is estimated at $1 million, which includes installation, engineering and testing.
“For instance, if we span development into the east section of (the Gunnison Rising annexation), that’s going to require a third substation,” explained Gardner. “That’s just an example of the demands on a system like ours when we’re trying to be proactive and build and add developments.”
City Manager Russ Forrest pointed out that the rate increase isn’t intended to subsidize future development, but ensure that existing infrastructure can be maintained.
“We’re also very fortunate we haven’t had long power outages in the middle of winter here,” added councilor Jim Miles. “If we don’t upgrade I can see that happening.”
The last increase in electric rates occurred in January 2017, with a 5 percent increase across the board. The increase was due to a rise in wholesale power costs the city pays.